African windows of opportunity could close for late-starters

Doing business in Africa is no longer quite the novelty it was in the early 1990s. The initial trickle of South African companies moving beyond our borders into the rest of sub-Saharan Africa has become a steady flow. Inevitably, the more players there are in Africa's markets, the more competition there will be for market share.

Competitive pressures are already starting to be felt in certain sectors in certain countries, an example being Nigerian telecommunications. About eight years ago when the market was liberalised, a tiny percentage of Nigerians had access to mobile phones and there were only one or two telecom companies competing in a virtually untapped market. Today, there are an estimated 60 million mobile subscribers in Nigeria and five mobile operators competing in a market that some have described as ‘cutthroat'.

Rising levels of competition have also been reported in the telecoms sectors of countries such as Kenya, Tanzania and Uganda, as well as in the air-travel business in East Africa and the banking sector in Nigeria.

Even in these relatively developed markets, however, there is still substantial room for growth, if not at the rapid rates experienced in the early stages of the growth curve. And in other, less-developed sectors, such as fast-moving consumer goods, there are many opportunities to tap into the increased buying power of Africa's estimated population of 900 million.

The point is that such opportunities are unlikely to go unnoticed for long - especially with an increasing number of African countries introducing laws to stimulate competition and encourage investment.

If South African companies do not act on the business opportunities available, Indian, Brazilian, Chinese or other investors surely will. In the past two to three years, Asian companies have become very active - and largely successful - investors in various African markets, particularly in resources, infrastructure and financial services.

Increasingly, interest in African investment opportunities is also coming from Nigerian businesses, which have been investing heavily in banking and retail in countries such as the Democratic Republic of Congo, Kenya, Uganda and Zimbabwe.

At this point, however, South Africa is still the leader in intra-African trade - a trend reflecting the growing recognition that the country's long-term competitive position in the world hinges on Africa.

No more presidents for life

The business climate in Africa has changed decisively for the better over the past 30 years. One of the most significant of these is the groundswell of support for good governance, especially the importance of decent elections, and an increasingly vocal civil society.

Compared to 30 years ago, governance issues are now on the agenda as never before. There are strong signs that Africa is moving away from the age of corrupt big men, presidents for life and military coups. At this point, only a handful of the 53 countries on the African continent still have old-style dictatorships or governments elected under questionable circumstances - like Equatorial Guinea and Libya. These countries, however, appear to be exceptions to a general trend towards democracy, good governance and political stability based on proper elections, term limits and the rule of law. With the death of President Bongo, there is now scope for change in Gabon. In Zimbabwe, civil society has not backed down in the face of repression and there are signs of slow progress in reestablishing democracy. Presidents for life are dinosaurs in the context of the African Renaissance.

An important driver of the growing insistence on good governance and the rule of law is the New Partnership for Africa's Development (NEPAD), with its peer review mechanism and governance framework. There is increasing recognition that the private and public sectors need to work together to best promote economic and social development and NEPAD has quite a coherent framework and, critically, it involves the private sector.

Individual countries have also been making headway in dealing with governance issues. Nigeria has made inroads into corruption and has an increasingly independent judiciary determined to uphold the rule of law. Countries like Botswana, Namibia and Uganda also have a healthy respect for the rule of law. Notwithstanding the contested election results last year, there have been positive developments in Kenya, although its judiciary is under-resourced. In Tanzania, the enforcement of contracts is being significantly eased through the establishment of specialised land, commercial and labour courts.

Like the rest of the world, the African Continent is not Utopia and there are still governance issues to overcome in some countries but the fact that good governance is so firmly on the agenda is very good news for Africa and foreign investors.